Experian releases Q1 data while anticipating ‘true impact’ of COVID-19


Delinquency rates on auto financing declined during the first quarter, according to Experian’s latest State of the Automotive Finance Market Report.

But Experian experts acknowledged the metrics might be ripe for change as the automotive industry grapples with the impact of COVID-19 and financial hardship felt by consumers.

What might be most noteworthy for finance companies that specialize in subprime paper is this tidbit. Experian reported on Tuesday that subprime financing made up 22.52% of total auto financing, which is a historic low for the first quarter of the year.

Meanwhile, Experian determined 30-day delinquencies decreased from 1.98% in Q1 of last year to 1.93% in Q1 of this year, while 60-day delinquencies dropped from 0.68% to 0.67% during the same time frame.

“The decrease in delinquency rates is a positive sign for the industry, though it’s important to recognize other factors may have attributed to the trend,” said Melinda Zabritski, Experian’s senior director of automotive financial solutions.

“For example, COVID-19 wasn’t declared a national emergency until mid-March,” Zabritski continued in a news release. “Add to that, some consumers are likely leveraging financial resources and assistance programs, such as stimulus checks, to manage through financial hardship, so its true impact may not be evident until the months ahead.”

To better assess COVID-19’s early impact on the industry, Experian also analyzed finance trends during the month of April. This data showed new-vehicle title changes dropped 50.8% compared to the previous year, while used-vehicle title changes dropped 54% over the same time period.

Analysts pointed out that additional findings showed a decrease in leasing year-over-year, with 24% of new vehicles being leased in April of this year, compared to 30% in April of last year.

Experian also mentioned affordability was a point of industry conversation prior COVID-19 and will likely remain so as consumers navigate their current financial situations over the coming months.

Analysts determined the average amounts financed continued to increase in Q1, with the average new-vehicle contract amount reaching $33,739 and the average used-vehicle contract amount clocking in at $20,723.

Experian indicated these increases reflected in average monthly payments as well, as the average new-vehicle payment increased from $554 in Q1 of last year to $569 in Q1 of this year. The report also showed average used-vehicle payments ticked up by $8 year-over-year, from $391 to $397.

Experian went on to note that as vehicle financing amounts continue to grow and consumers look for the most affordable options, the trend of prime consumers opting to finance used vehicles continued.

In fact, analysts discovered prime consumers comprised 50.47% of used-vehicle financing in Q1.

According to the report, used-vehicle financing is most common in Mississippi, making up 78.45% of vehicle contracts in the state. Rounding out the top five states for used-vehicle contracts are Indiana (77.89%), Tennessee (77.78%), Michigan (77.51%) and Minnesota (77.24%).

“As consumers continue to navigate the financial impact of COVID-19, they may consider all options available to them,” Zabritski said. “Understanding data points like where used vehicle loans are most prominent can help lenders and dealers make informed decisions as consumers begin to re-enter the market.”

Additional findings for Q1 include:

• The average credit score for new-vehicle contracts was 721, while the average credit score for used-vehicle financing was 660.

• The Honda Civic was the most commonly leased vehicle, making up 3.5% of lease market share.

• Average terms saw a slight uptick: average new vehicle terms were 69.17 months in Q1 compared to 68.85 months in Q1 of last year while average used terms increased to 64.83 months from 64.67 months in the same time frame.

• Interest rates saw decreases in Q1, as the average new-vehicle rate was 5.61% and average used-vehicle rate was 9.65%.

To view the entire Q1 2020 State of the Automotive Finance Market Report via a webinar, go to this website.

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